IDEAS home Printed from https://ideas.repec.org/p/ecj/ac2002/129.html
   My bibliography  Save this paper

Are Preferential trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?

Author

Listed:
  • Lim“o, Nuno

    (University of Maryland)

Abstract

Increasingly, in regional agreements, large economies offer lower trade barriers in exchange for cooperation in environmental, intellectual property and other issues by small economies. What is the effect of such agreements on multilateral trade liberalization? We show that, even in the absence of trade creation or diversion, regional agreements increase the cost of multilateral tariff reductions. Such reductions decrease the threat large countries can use in regional agreements causing a loss in regional bargaining power. By explicitly modeling the interaction between regional and multilateral negotiations we show that this result is due to the WTO's most-favorite nation rules and analyze the welfare effects of strengthening and weakening them. Moreover, we show that "deepening" duty-free regional agreements requires increases in multilateral tariffs.

Suggested Citation

  • Lim“o, Nuno, 2002. "Are Preferential trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?," Royal Economic Society Annual Conference 2002 129, Royal Economic Society.
    • Handle: RePEc:ecj:ac2002:129
    as

    Download full text from publisher

    File URL: http://repec.org/res2002/Limao.pdf
    File Function: full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Madanmohan Ghosh & Carlo Perroni & John Whalley, 1998. "The Value of MFN Treatment," NBER Working Papers 6461, National Bureau of Economic Research, Inc.
    2. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, vol. 53(2), pages 335-361, April.
    3. Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
    4. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(1), pages 1-24, February.
    5. Nuno Limão, 2018. "Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes?," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 9, pages 257-281, World Scientific Publishing Co. Pte. Ltd..
    6. Lisandro Abrego & Carlo Perroni & John Whalley & Randall M. Wigle, 2001. "Trade and Environment: Bargaining Outcomes from Linked Negotiations," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 414-428, August.
    7. Cebi, Pinar & Ludema, Rodney, 2002. "The Rise and Fall of the Most-Favored-Nation Clause," Working Papers 15853, United States International Trade Commission, Office of Economics.
    8. Horn, Henrik & Mavroidis, Petros C., 2001. "Economic and legal aspects of the Most-Favored-Nation clause," European Journal of Political Economy, Elsevier, vol. 17(2), pages 233-279, June.
    9. Fernandez, Raquel & Portes, Jonathan, 1998. "Returns to Regionalism: An Analysis of Nontraditional Gains from Regional Trade Agreements," The World Bank Economic Review, World Bank, vol. 12(2), pages 197-220, May.
    10. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
    11. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ludema, Rodney D. & Mayda, Anna Maria, 2009. "Do countries free ride on MFN?," Journal of International Economics, Elsevier, vol. 77(2), pages 137-150, April.
    2. Nuno Limão & Marcelo Olarreaga, 2018. "Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 15, pages 403-426, World Scientific Publishing Co. Pte. Ltd..
    3. Kyle Handley & Nuno Limão, 2018. "Trade and Investment under Policy Uncertainty: Theory and Firm Evidence," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 4, pages 89-122, World Scientific Publishing Co. Pte. Ltd..
    4. repec:ilo:ilowps:469183 is not listed on IDEAS
    5. Ornelas, Emanuel, 2008. "Feasible multilateralism and the effects of regionalism," Journal of International Economics, Elsevier, vol. 74(1), pages 202-224, January.
    6. Baybars Karacaovali & Nuno Limão, 2018. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 14, pages 373-401, World Scientific Publishing Co. Pte. Ltd..
    7. Nuno Limão, 2018. "Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes?," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 9, pages 257-281, World Scientific Publishing Co. Pte. Ltd..
    8. Nuno Limão & Kamal Saggi, 2018. "Tariff retaliation versus financial compensation in the enforcement of international trade agreements," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 12, pages 337-349, World Scientific Publishing Co. Pte. Ltd..
    9. Bagwell, Kyle & Staiger, Robert W., 2010. "Backward stealing and forward manipulation in the WTO," Journal of International Economics, Elsevier, vol. 82(1), pages 49-62, September.
    10. Renliang Liu & Thanasis Stengos & Yiguo Sun, 2024. "Spatial spillovers in trade agreement memberships: Does institutional proximity matter?," Review of International Economics, Wiley Blackwell, vol. 32(3), pages 1398-1433, August.
    11. Bernhard Herz & Marco Wagner, 2010. "Multilateralism versus Regionalism!?," DEGIT Conference Papers c015_043, DEGIT, Dynamics, Economic Growth, and International Trade.
    12. Ornelas, Emanuel, 2012. "Preferential trade agreements and the labor market," LSE Research Online Documents on Economics 121752, London School of Economics and Political Science, LSE Library.
    13. Limão, Nuno, 2005. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the US," CEPR Discussion Papers 4884, C.E.P.R. Discussion Papers.
    14. Ketterer, Tobias D. & Bernhofen, Daniel & Milner, Chris, 2014. "Preferences, rent destruction and multilateral liberalization: The building block effect of CUSFTA," Journal of International Economics, Elsevier, vol. 92(1), pages 63-77.
    15. Karacaovali, Baybars & Limao, Nuno, 2005. "The clash of liberalizations : preferential versus multilateral trade liberalization in the European Union," Policy Research Working Paper Series 3493, The World Bank.
    16. Hideo Konishi & Minoru Nakada & Akihisa Shibata, 2024. "Free trade agreements with environmental provisions between asymmetric countries: transfer of clean technology and enforcement," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 26(1), pages 1-30, January.
    17. Bown, Chad P., 2014. "Trade policy instruments over time," Policy Research Working Paper Series 6757, The World Bank.
    18. Nuno Limão, 2018. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 13, pages 353-371, World Scientific Publishing Co. Pte. Ltd..
    19. Kilolo, Jean-Marc Malambwe, 2013. "Country size, trade liberalization and transfers," MPRA Paper 47996, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers 19, Wisconsin Madison - Social Systems.
    2. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    3. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    4. Costas Hadjiyiannis, 2004. "Common markets and trade liberalization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 484-508, May.
    5. Satya P. Das & Subhadip Ghosh, 2006. "Endogenous trading bloc formation in a North‐South global economy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 809-830, August.
    6. Ralph Ossa, 2011. "A "New Trade" Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122-152.
    7. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2004. "Regionalism: Old and New, Theory and Practice," Chapters, in: Giovanni Anania & Mary E.. Bohman & Colin A. Carter & Alex F. McCalla (ed.), Agricultural Policy Reform and the WTO, chapter 23, pages 593-622, Edward Elgar Publishing.
    8. Staiger, Robert & Bagwell, Kyle & Bown, Chad, 2015. "Is the WTO Passé?," CEPR Discussion Papers 10672, C.E.P.R. Discussion Papers.
    9. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, vol. 53(2), pages 335-361, April.
    10. Antonis Adam & Thomas Moutos, 2002. "The Political Economy of EU Enlargement: Or, Why Japan is not a Candidate Country?," CESifo Working Paper Series 704, CESifo.
    11. Paola Conconi & Carlo Perroni, 2005. "Conditionality, Separation, and Open Rules in Multilateral Institutions," ULB Institutional Repository 2013/5843, ULB -- Universite Libre de Bruxelles.
    12. Richard Baldwin, 2008. "Big-Think Regionalism: A Critical Survey," NBER Working Papers 14056, National Bureau of Economic Research, Inc.
    13. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    14. Rupa Duttagupta & Arvind Panagariya, 2007. "Free Trade Areas And Rules Of Origin: Economics And Politics," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 169-190, July.
    15. Emanuel Ornelas, 2025. "Political Competition and the Strategic Adoption of Free Trade Agreements," Review of International Economics, Wiley Blackwell, vol. 33(2), pages 380-392, May.
    16. Paul Wonnacott & Ronald Wonnacott, 2005. "What's the Point of Reciprocal Trade Negotiations? Exports, Imports, and Gains from Trade," The World Economy, Wiley Blackwell, vol. 28(1), pages 1-20, January.
    17. Teteryatnikova, Mariya, 2018. "R&D in trade networks: The role of asymmetry," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 307-350.
    18. Langhammer, Rolf J. & Wößmann, Ludger, . "Erscheinungsformen regionaler Integrationsabkommen im weltwirtschaftlichen Ordnungsrahmen: Defizite und Dynamik," Chapters in Economics,, University of Munich, Department of Economics.
    19. Fritz Breuss, 2004. "WTO Dispute Settlement: An Economic Analysis of Four EU–US Mini Trade Wars—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 4(4), pages 275-315, December.
    20. Winters, L. Alan, 1996. "Regionalism versus Multilateralism," CEPR Discussion Papers 1525, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:ac2002:129. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.